Global communications equipment investment, which combines investments by wireless and wireline carriers, experienced a slowdown in growth in the first half of 2023 after several years of strong performance.
Dell’Oro said the restraint was not surprising and reflected the expected pullback in investments, particularly in wireless, consistent with the findings of the Communications Equipment General Report.
The research firm hinted that the situation will continue to be difficult in 2024 and stabilize in 2025. Global communications equipment investment is projected to decline by 7% by 2025 compared to 2022.
Dell’Oro said there was little change in the broader outlook for communications. Global telecommunications equipment investment is projected to decline at a CAGR of 2% over the next three years. Growth in India and stable trends in Europe are not enough to offset the sharp slowdown in capital investment in North America.
The transition to steady state in the United States will primarily impact radio activity, leading to a 25-30% decline over the next three years. Furthermore, given the questionable prospects for any change in the current revenue trajectory and the expected top-line growth for flat operators, capital intensity could approach 16 percent by 2025, just below the current trend line. It will go below.
“The forces shaping the capital investment cycle have not changed,” said Stefan Pongratz, vice president of Dell’Oro Group. “Operators can become more capital intensive in the short term, but there is a reason the trend line has remained flat for over a decade.”
He added: “We are currently operating at a high rate, so in a world where neither 4G nor 5G has been able to change the revenue trajectory, the acceleration in capex remains a temporary phenomenon.” .
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